Gold’s meteoric rise in 2025: A safe haven amid global uncertainty

Gold has taken centre stage in 2025, soaring 50% and outperforming major asset classes. This insight explores why gold has become the ultimate safe haven amid global economic uncertainty, central bank buying, and geopolitical tensions. Below are the key drivers behind this rise:

• Gold has surged 50% in 2025 as investors seek safety amid global economic and geopolitical uncertainty.
• Central bank buying and Fed easing have propelled gold to its strongest rally in decades.
• With currencies under pressure and markets volatile, gold shines as the ultimate safe haven in 2025.

This year, gold has been experiencing its strongest rally since 1979 when the Iranian Revolution disrupted the global economy. Since the start of 2025, the spot price of gold has risen by 50%, outpacing leading asset classes. Data from Bank of America shows that this momentum may continue, driven bystructural demand from central banks and monetary easing initiated by the US Federal Reserve (Fed).

The loosening of the Fed monetary policy comes at a pivotal moment as employment figures weaken while inflation remains sticky – 32,000 jobs in the US were lost in September. The pivot announced by FED Chair Powell at Jackson Hole reflects a broader economic slowdown, as the impact of trade disputes continue. Traditionally, the US Treasuries and the dollar have served as safe havens, but investor confidence has eroded amid ongoing challenges at the Fed and a global rebalancing of US trade policy. Gold has emerged as a natural safe haven asset amid the US dollar’s underperformance so far this year.

Furthermore, ongoing geopolitical developments in the Middle East and Eastern Europe are also fuelling the gold rally, especially as the previously optimistic stance of the Trump administration on resolving Russia-Ukraine conflict has been abandoned amid stalled diplomatic talks. During the summer, the ‘One Big Beautiful Bill Act’ passed by Congress and signed into law by the President has also impacted U.S. Treasuries. While the bill aims to stimulate the economy through tax cuts, the anticipated decline in government revenue is expected to strain the U.S. fiscal outlook

Central banks, particularly in emerging markets, have increased the pace of gold purchases since 2022, when Russia’s foreign-currency reserves were frozen following its invasion of Ukraine. Emerging market central banks remain significantly underweight in gold compared to their developed market counterparts and are gradually increasing allocations as part of a broader diversification strategy. 

Estimates indicate that China holds less than 10% of its reserves in gold, compared to around 70% for the US, Germany, France, and Italy. Central banks purchased less gold in July than in an average month this year, which aligns with seasonal patterns. Central bank purchases tend to slow in the summer and pick up again from September onwards. Notably, some 95% of surveyed central banks expect global gold holdings to increase in the next 12 months, with none anticipating a decline. 

Another driver of gold demand is the weaker outlook for other hard currencies. After the collapse of the newly appointed French government and the French credit downgrade, the USD/EUR spot rate ticked higher. The French vs German 10-year spread widened to its highest level since January, with the French 10Y yield trading 86 basis points above Germany’s. This is in the context of the yield on Germany’s 10Y Bund rising to 2.73%, tracking increases in European, US, and Japanese government bond yields as political turbulence reverberates through global markets. 

The Euro area has not displayed signs of economic strength this year. Based on ECB forecasts, GDP growth is expected to reach 1.2% and headline inflation to settle at 2.1% annually. Estimates of the Euro trade balance showed a €12.4 bn surplus in trade in goods with the rest of the world in July 2025, compared with €18.5 bn in July 2024. Compared to July 2024, the Euro balance decreased by €6.1 bn, mainly attributed to chemicals and related products, which experienced a decline in surplus from €23.8 bn to €17.4 bn. Multiple policy rate cuts this year by the ECB sent the rate to 2% to accommodate the modest inflation growth outlook. 

In Japan, the Yen fell to a six-month low after Sanae Takaichi’s leadership victory, due to concerns regarding fiscal spending. Takaichi has pledged to boost the Japanese economy with aggressive spending and has been critical of the tightening of monetary policy by the Bank of Japan (BoJ). The economic slowdown triggered by trade disputes and the heavy reliance of the Japanese economy on exports has put the BoJ in a difficult situation, as a rate hike needed to curb inflation could potentially deter economic growth prospect. Japan’s finance minister said authorities were watching out for excessive moves in currency markets. Hence, the Yen could remain weak in the coming weeks, potentially opening the door for the resumption of the Yen carry trade – depending on the volatility in the market and the outcome of the next BoJ policy meeting.